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Exploring the feasibility of implicit allocation in the (North West) European gas market

Position paper and evaluation of responses documents

The position paper of NRAs within GRI NW on the feasibility of introducing implicit allocation in the (North West) European gas market can be found here. Next to the position paper itself, NRAs within GRI NW have also drafted an evaluation of responses document which reflects the main feedback from stakeholders, including the response from NRAs within GRI NW. This document also explains to what extent the position paper has been revised based upon the received consultation responses. The evaluation of responses document can be found here.

Background to the position paper

The Council of European Energy Regulators (CEER) has – in close cooperation with stakeholders – developed the first European Gas Target Model. In this vision, CEER foresees two measures that should contribute to creating an European internal energy market. Firstly, a series of harmonised liquid and functional regional gas markets within the EU should be created (possibly through zone merging and the implementation of entry/exit zones). In a second step those functioning wholesale gas markets should be connected through the efficient use of interconnector capacity (possibly through an implicit allocation mechanism).

In discussions on the Gas Target Model no clear “yes or no” – at least for NRAs within GRI NW – came forward on the question whether implicit allocation should be introduced in the gas market. At the same time, GRI NW – of all three gas regions – is an advanced region in terms of gas market development and therefore well suited for a possible implicit allocation pilot. For this reason, NRAs within GRI NW decided to draft a position paper to explore the feasibility of introducing implicit allocation in the (North West) European gas market.

Process for drafting the position paper

In the period March 2012 – September 2012, NRAs within GRI NW have developed a draft position paper. As a next step, to ensure an open dialogue, on 1 October 2012 a public consultation was launched. The purpose of the public consultation – containing 11 consultation questions – was to collect views of stakeholders in order to finalize the position paper. The public consultation solicited feedback from various stakeholders (10 responses received) and closed on 5 November 2012. Also, a workshop took place mid October to provide stakeholders the possibility to orally share their views. Stakeholders views as presented during the workshop can be found in the minutes.

Goal and scope of the position paper

In the position paper*, NRAs within GRI NW explain whether they see added value (and under what conditions) in introducing implicit allocation in the gas market and – should this be the case – when this coupling mechanism should be introduced. Given the fact that practical experience is needed to determine the design, the position paper does not answer the question what the implicit allocation mechanism should look like in detail. However, the document does present relevant design issues.

* The Brattle report that is published has served as a starting point for the position paper. As such, the Brattle report is published as a background document. In the position paper itself, the background and role of the Brattle report is explained in more detail.

Content of the position paper

The position paper contains the following chapters:

Issues associated with the allocation and use of cross-border capacity;

European measures to solve current allocation issues;

Added value of Implicit Allocation;

Considerations on the introduction of implicit allocation;

Design issues related to the implicit allocation mechanism.

The most important conclusions from the position paper are presented here. More detailed and background information can be found in the position paper itself.

More information

In case of any questions with regard to the position paper, please contact the Programme Office of GRI NW via the following e-mail address: DEInternational@acm.nl